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Commonwealth bypasses hospital funding agreement to end dispute with Victoria

The Federal Government is bypassing the Victorian Government to deliver funds directly to hospitals. It's an extraordinary intervention which may be replicated in other states that are in dispute with the Commonwealth over hospital funds.

Transcript

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TONY EASTLEY: The hospitals funding agreement between the states and the Commonwealth appears to be on shaky ground after an extraordinary Federal Government intervention in Victoria's hospital system.

Canberra says it will now deliver hospital funds by cutting other areas of government funding to Victoria and will then bypass the state by giving the money directly to the hospitals.

Simon Lauder reports from Melbourne.

SIMON LAUDER: For many months the Victorian and Federal Governments have been blaming each other for a funding shortfall which has led to surgery cancellations and bed closures. It stems from a $107 million cut to forecast Commonwealth payments and has led to a senate inquiry.

Now the Federal Health Minister Tanya PIibersek says the money will be delivered, but not by the usual means.

TANYA PLIBERSEK: I'll be redirecting this money from Commonwealth funding that would have gone to the state of Victoria, instead giving it directly to hospital systems.

SIMON LAUDER: This standoff has been going for months and both sides have held firm until now. Why have you backed down?

TANYA PLIBERSEK: Because I care about Victorian patients and I've been distressed to see the politicking that Ted Baillieu has been prepared to engage in.

SIMON LAUDER: What kind of politics are you referring to?

TANYA PLIBERSEK: Oh the fact that the Victorian Government has made massive cuts to its health budget and has been looking around for someone to blame for that for many months now.

SIMON LAUDER: Most of the money will come from reward payments for occupational health and safety targets which the Victorian Government has failed to meet.

TANYA PLIBERSEK: That's $55 million that we can put directly into frontline services for the people of Victoria.

SIMON LAUDER: If you're bypassing that partnership by funding hospital services directly, why should any of the states abide by it now?

TANYA PLIBERSEK: Well because we're not putting extra federal funding into their systems. We're managing their budgets for them.

What we're doing with Victoria is redirecting funding that would have gone into their Treasury, into consolidated revenue for them to manage as they saw fit. Instead we're giving it to local hospital administrators.

States have been very clear that they see themselves as the managers of their systems. I don't think other states will be particularly keen to follow a path that has the Commonwealth distributing money instead of the state government to their hospital systems.

SIMON LAUDER: And will you rule out a similar intervention in other states, Queensland and New South Wales for example?

TANYA PLIBERSEK: Look, no, I won't rule that out.

SIMON LAUDER: The tactics are similar to those of the Howard government which took over the funding of a regional hospital in Tasmania.

While the Federal Opposition's health spokesman Peter Dutton criticises the tactics, he says other states now deserve the same.

PETER DUTTON: To restore funding to one jurisdiction but not to the other states and territories is quite unbelievable. And patients, particularly in Queensland and New South Wales that have been hit the hardest, I think will be very angry at Julia Gillard and asking her to explain why it's good enough to restore the funding to Victoria but not to Queensland and New South Wales.

SIMON LAUDER: The Victorian Government has welcomed the Commonwealth's decision. It maintains the population figures used to justify the Commonwealth funding cuts are false.